30/04/2010 : Football League Blog : Fancy An Extra £217,000 Per Season? No Thanks!

30 April 2010 : Fancy An Extra £217,000 Per Season? No Thanks!

Earlier this week, we covered the story that the Football League were in discussions with the Premier League concerning potential changes concerning the revelation of the ultimate beneficial owners of football clubs. Further details have now come to light concerning what the Premier League want the Football League to agree to, in return for larger 'solidarity payments' made by the Premier League.

Currently the Premier League pays the Football League around £30 million in what is known as 'solidarity payments'. The payments are an odd arrangement - there doesn't appear to be any contractual obligation for the Premier League to provide this money. Officially, the money is provided as handouts to provide support for the future of the game and is provided to clubs to be invested in youth and community related projects and set-ups. The cynics believe that it is hush money provided to stop the government stepping in and investigating whether the Premier League creates a closed-shop cartel that no outsider can break into. The solidarity payments become a token financial gesture to try and bridge the huge gap between the two leagues.

This week, the Premier League have offered to double the money they give out to the Football League in a package that is worth more than £400 million. The Football League yesterday announced that they are rejecting the offer. An offer that would have seen a League One side's income jump from £108,000 to £325,000, and a League Two club jump from £72,000 to £250,000, to add to the £430,000 League Two clubs currently receive in television revenue. League One and League Two's Chairmen are believed to have rejected the offer unanimously.

"What?!?", I hear you ask. "Has John Fry and his fellow Chairmen lost their collective marbles?" - in these slightly uncertain financial times, the possibility of tripling your income from one particular source would normally have Mr Fry (and others) snapping your hand off in their eagerness to do the deal. And of course, that's what the Premier League wanted to happen.

Unfortunately for the Premier League, and fortunately for the future of the Football League, the Chairmen at League One and League Two level have had the sense to look at the long term picture as well as what difference it would make to their club bank accounts. The Championship level Chairmen were all in favour of the Premier League's proposals with one unnamed exception.

So why is there such a split in the Football League? The reason is that the Championship clubs will see their solidarity payments rocket from £830,000 to an average of £2.2 million per club (Championship payments are staggered based on the previous season's league position) - something that Championship clubs see as essential for them to compete with clubs relegated from the Premier League, and ideally to reach the top tier themselves.

Mind you, they'll be doing so at a pretty steep disadvantage - the proposals also include £16m payments for clubs relegated from the Premier League during their first two seasons, followed by £8m in year three and four if that club has not returned up to the top flight by then. Currently clubs relegated from the top flight receive £23.4m, split over two years - i.e. £11.2m per year spent in the Football League.

The Championship clubs seem to like that as an offer, and so 23 out of 24 of them voted for it to be accepted. The reason why League One and League Two clubs don't like this, is that it introduces a huge gulf between the Championship and League One. Because the solidarity payments are based upon which division you were in last season, a League One side promoted to the Championship would be immediately an average of £1.9 million worse off than any other side in that division.

Today, the differential is around £700,000 which is difficult to overcome, but under the new plans, all bar the likes of Norwich City and Leeds United would struggle deeply to cope with that. Most League One sides would survive one season at Championship level and then get relegated, unless they can find a sugar daddy with £1.9 million going spare. Equally, any relegated Championship side, would take their solidarity payment from where they finished the previous season, giving them money approaching the turnover level of a small League One club. The likes of Yeovil Town wouldn't stand a chance of getting promoted. And if by some miracle they managed to get promoted, the chances of them staying in the Championship are slightly less than nil.

The argument is that the gap between the Premier League and the Championship would merely be shifted down a level, with League One sides bearing the brunt. How soon before a relegated Championship side starts demanding parachute payments on top of the solidarity payments to ease their financial loss of dropping into third tier football? Many League One and League Two Chairmen see this as the creation of a Premier League Second Division by stealth - something that Bolton Wanderers Chairman Phil Gartside has been seeking to create, but as yet has been unable to put forward plans within his own Premier League community that the top flight big guns will accept.

Officially, the Football League and the Premier League will go back to the negotiating table to resolve their differences. New Football League Chairman Greg Clarke has told BBC Five Live that he merely sees it as a difference of opinion that needs resolving:

"I wouldn't say there was a split, I would say there was a difference of opinion. It may distort competition and we need to understand that more. Some of the regulation changes may have an economic impact and the clubs want clarity on that and we have got to engineer a consensus and try and move ahead."

The suggestion is though that Mr Clarke doesn't have a lot of time to reach consensus. Reports on the BBC Sport website and in The Guardian suggest that the Premier League want a decision made by the Football League for the third week in May, to allow time for ratification in the respective League AGMs. The Guardian suggest that the offer is a final one and non-negotiable, whilst the BBC suggest that the Premier League are even prepared to withdraw the existing £30m solidarity payment package if they don't get their way. The word 'blackmail' springs to mind here.

There are a number of possible outcomes to the current proposals. Given that the Championship clubs are in favour of the proposals, it is quite possible that "Premier League II by Stealth" could become an actual breakaway league if a fixed number of clubs do not like the democratic decision made by their fellow members. Alternatively, Football League members could buckle and accept the offer, but that would pretty much represent the death knell of the ambitions of clubs like Yeovil Town to reach the Championship division, let alone stay there. One hopes that there is a third option - that the Premier League's threats to withdraw financial support for the Football League are merely bluster or a show of strength against new boy Greg Clarke to see how he stands up to the muscle flexing. We will watch this one closely to see what direction it takes next.

Just what Football needs, more internal politics, this time a Premier League version of Russian Roulette.
30/04/2010 21:55:19

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